While last week began with concern over Donald Trump's announcements on customs tariffs, the markets were finally able to absorb these tensions and turn to more optimistic perspectives.
The concept of the "Thucydides trap", well known in international relations, sheds light on Donald Trump's strategy. Although interspersed with more or less funny sallies and even excesses that only he knows the secret to, the common thread of the trade war launched in all directions by the American president is simple: to subjugate its allies (see the fate reserved for members of the USMCA) and to overtake China, particularly in high-tech areas (AI, quantum computing, etc.) by managing, if possible, to kill its international competitiveness (first in the area of customs duties to combat the Chinese structure of low costs and social dumping and, if possible, in the area of currency, like what the USA did to Japan in 1985). To decipher (and put into perspective) Donald Trump's statements on the economic and financial sphere, it is worth listening to his Secretary of the Treasury, Scott Bessent, a well-known emulator of George Soros, who perfectly sums up Donald Trump's negotiation tactics: "My general view is that at the end of the day, he's a free trader. It's escalate to de-escalate.".
In this game of influence, Europe risks becoming a mere spectator, or even a field of indirect confrontation between the United States and China, particularly in key sectors such as rare earths, of which Ukraine holds strategic resources. Some European projects such as "Current AI" nevertheless show a willingness to react, but their impact remains limited given the scale of the resources mobilized by the major powers.
In this month of February, and without any connection with the Chinese New Year, we remain tactically constructive on China due to the attractive valuations and expected political support. However, structurally, if we look at a key indicator such as government tax revenues, they are down 3.4% in 2024 compared to the previous year and we can legitimately doubt the strength of China's growth in value, especially since it is clearly in a deflationary phase (with a severe real estate crisis, sluggish domestic demand, the worrying debt of certain local governments, and above all an entry into economic war which has a definite deflationary effect via the government's subsidization of exports of industrial overcapacity sold at a loss). Finally, on the emerging markets side, India, after several years of strong growth, is showing signs of slowing down. High valuations combined with less marked growth dynamics could slow its momentum. In this context of trade war, another major geopolitical issue is under discussion. Donald Trump has relaunched negotiations with Vladimir Putin to try to end the conflict in Ukraine, a commitment made during his campaign. An end to the conflict would obviously be beneficial, both for Ukraine and for regional stability. However, on the economic front, if these negotiations were to be limited to a bilateral dialogue between the White House and the Kremlin, European interests could be relegated to the background. Between trade tensions, international negotiations and technological advances, the year promises to be full of challenges and upheavals. Despite this turbulence, the markets have once again demonstrated their resilience. The CAC 40 has returned to above 8,000 points, while the DAX has reached a new all-time high. In the United States, the S&P 500 and the Nasdaq have held up well, driven by persistent optimism around AI and the gradual adaptation of investors to Trump's policies. On an optimistic note, 77% of S&P 500 companies that reported fourth-quarter results beat consensus expectations, with an average EPS growth rate of 16.4% (versus estimates of 11.9%).
